ICAEW chart of the week – EU financial settlement

Last year we published a policy insight ‘Analysing the EU exit charge’ explaining the likely elements of an exit charge payable by the UK on leaving the EU.

Our higher scenario of £30bn was based on contributions until the end of the EU budget period in 2020. With a formula similar to this scenario now agreed, the Treasury estimate is that the UK will pay £37bn (plus or minus £2bn). This is £7bn more than we expected, so we decided to look at the reasons for the difference.

As with any negotiation there were some ups and downs, additional commitments of £3bn are due to the transition period. A £1bn concession on EU operating assets was offset by £3bn in timing differences and a net £1bn from revisions to estimates. Nothing like £7bn though.

The difference is the UK’s puzzling agreement to accept the return of its £3bn original investment in the European Investment Bank, rather a share of its £10bn of net assets, including accumulated profits. This results in an increase of £7bn in the net financial settlement. We still don’t know why this was agreed, or what the UK got in return…

To find out more, read our press release (https://bit.ly/2tPM5lQ) and the policy insight update itselft (https://bit.ly/2pWbnL1).

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